VISA steel to invest Rs 1,146 cr; files draft for IPO

Unperturbed by the softening of steel prices for almost a year now, VISA Steel announced an investment of Rs 1,146 cr for its proposed 0.5 million tonne special and stainless steel plant in Orissa.

indiaUpdated: Jan 11, 2006 15:30 IST

Press Trust of India None

Unperturbed by the softening of steel prices for almost a year now, Kolkata-based VISA Steel Ltd, a part of the Rs 1,600 crore VISA group, announced on Wednesday an investment of Rs 1,146 crore for its proposed 0.5 million tonne special and stainless steel plant in Orissa.

The investment of Rs 1,146 crore would be funded in a debt-equity ratio of 65-35, VISA Group Chairman Vishambhar Saran told PTI, adding that the company had already tied up a term loan of Rs 745 crore with various banks.

"The balance of Rs 401 crore will come from internal accruals and additional equity of the Group," he said. VISA Steel has also approached market regulator SEBI for an Initial Public Offer to sell 35 million shares of face value of Rs 10.

VISA Steel project of 0.5 million tonne Special and Stainless Steel is expected to go on stream by 2007.

"We have already grounded an investment to the tune of Rs 252 crore at our plant in Kalinganagar, Orissa, in Blast Furnace and Coke Oven Batteries," he said.

The integrated steel and stainless steel plant in Orissa will have features of Coke Ovens and Ferro Chrome Furnace.

Expressing confidence that the company would not be affected by the slump in steel sector, the VISA group chairman said: "Our production cost will be low as the company enjoys a strategic advantage of being close to all raw materials, port and railway network."

And the company would capture 25 per cent of Indian stainless steel segment soon after it starts commercial production, he said. MORE

The company had filed the Draft prospectus with SEBI on January 2. Taking into account, the three-week period that SEBI will take to give its approval and another week for clarifications, the company may hit the market in February.

"We are among three to four companies, which are in stainless steel segment. Since all other companies are away from these strategic advantage we are not worried about the consumption of the product," Saran said.

On the future prospects of steel in India, he said the company would be manufacturing only long products like rods and wires, which are always in a short supply in the market.

Elaborating the strategy to consolidate the business, he said: "The sale of coke and chrome from the facility would add strength to the venture. While we aim to earn Rs 200 crore from sale of coke, the chrome marketing is expected to give us additional Rs 150 crore annually."

The VISA Chairman added that for the Orissa project, the company targeted to import 4 lakh tonne coke, of which only 1.5 to 2 lakh tonnes would be consumed in the plant.

"Rest two lakh tonnes of coke will be up for sale in open market," he said.

He informed that the company was close to be awarded a 65 to 70 million tonne iron ore reserve for the integrated steel plant project.